Richard Byles, president and CEO of Life of Jamaica (right) addresses shareholders at the company's 36th annual general meeting Wednesday. LOJ chairman Dodridge Miller is at left. - Rudolph Brown/Chief Photographer

Ashford W Meikle, Business Reporter

Life of Jamaica president and CEO Richard Byles said Wednesday that notwithstanding significant returns on its recent real estate investments, the company is committed to its core business as life underwriters.

"We are an insurance company and not a real estate company - we are not prepared to make a big bet in real estate, just a marginal bet," Byles assured shareholders at the company's annual general meeting at the LOJ auditorium in New Kingston.

He was responding to a shareholder's questions about the diversification of LOJ's revenue stream.

The insurance company recently returned to the real estate market with the development of an apartment complex, Winchester Estate, and office complex, Winchester Business Centre, on Winchester Road in Half-Way-Tree on the four and half acres former headquarters of Jamaica Broilers which LOJ bought from the poulterers for about US$3 million in 2004.

Appetite whetted

With its appetite for real estate acquisition whetted, LOJ then bought 10 acres of beachfront property in Llandovery in St. Ann from Jamaican Redevelopment Foundation for US$1.6 million, which is slated for a billion dollar residential development of some 80 semi-detached three-bedroom homes and apartments.

The company's next target was a property neighbouring Winchester Estate on Strathairn Avenue on which it plans to construct an additional block of the apartment complex by year-end.

The Winchester development marked LOJ's first venture into the real estate market in a decade since the financial sector meltdown of the 1990s, which saw the company turning to FINSAC - the state agency that pumped liquidity into troubled financial institutions - since it had used short-term money to finance long-term assets. With the intervention of FINSAC, the insurance company - which was acquired by Sagicor in 2001 - had to shed a huge portion of its real estate portfolio.

Byles has, however, pointed out in the past that LOJ's current strategy is not to buy property and hold and that its return to real estate development is necessary for the company to grow its earnings in a low interest rate economic environment. Apparently, that has paid off.

"The Winchester development has paid off very much to our expectations," the CEO told shareholders. "Winchester is important to us in that it has given us a bigger yield than if we were to put the money into fixed income securities."

$3 billion net income

Speaking on the sidelines of the AGM, Byles declined to say what contribution the development made to the $3 billion in net income that the LOJ Group earned for 2006 financial year he hinted at the returns.

"Profits from Winchester are substantial but, put it in the context of our total profits, they are not that big. I can assure you, though, that it fulfilled our expectations to make a good return on equity," he said.

"Remember I have said that my hurdle rate is 20 per cent."

Still, the CEO admitted that in developing the Winchester Business Centre, Life of Jamaica may have miscalculated in its assessment of that market, evidenced by the difficulty it had in offloading the lone 24,000 square foot unit.

The unit, which occupied an entire floor, had a price tag of $250 million.

Subdivided the space

LOJ eventually subdivided the space into 10 units of about 2,400 square foot each.

"What we have found is that someone might be interested in purchasing the whole building but - one floor is not as easily saleable," said Byles.

"Anything we do in the future will be more on the small side ... there are a lot of new small businesses in Jamaica and they all want offices."

Byles said that about 75 per cent of the units in the business centre, which is 90 per cent complete, has been sold and will be handed to buyers starting later this month. He also hinted that this would not be LOJ's sole commercial development.

"We have couple ideas," he said. "Buoyed by the success of the Winchester Business Centre, we are likely to replicate that elsewhere also."

ashford.meikle@gleanerjm.com